Tjalling C. Koopmans Research Institute
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How to reach the authors Please direct all correspondence to the first author. Dr. M.P.Lycklama à Nijeholt Leiden Law School Institute for Tax Law and Economics Department of Business Studies Kamerlingh Onnes Gebouw Steenschuur 25 2311 ES Leiden The Netherlands. e-mail: [email protected] Dr. Y.K.Grift Utrecht University Utrecht School of Economics Kriekenpitplein 21-22 3584 TC Utrecht The Netherlands. E-mail: [email protected] Prof. Dr. J.M.J. Blommaert Tilburg University PO Box 90153 5000 LE Tilburg The Netherlands. E-mail: [email protected]
This paper can be downloaded at: http:// www.uu.nl/rebo/economie/discussionpapers Utrecht School of Economics Tjalling C. Koopmans Research Institute Discussion Paper Series 12-21
GOODWILL MEASURING VALUE CREATION OF ACQUISITIONS: AN EMPIRICAL RESEARCH
M.P.Lycklama à Nijeholt a Y.K.Grift b J.M.J. Blommaertc
aLeiden Law School Leiden University
b Utrecht School of Economics Utrecht University
c Financial Accounting Tilburg University
August 2012
Abstract The reason for this research is that at the beginning of the 21st century, some important changes were introduced in the international standards of accounting affecting reporting on goodwill. The intentions of the standard-setting bodies in drafting the new rules were that the financial statements would better reflect the underlying economics of the acquired goodwill.1 In this research it is tested whether goodwill under the new accounting regime does reflect underlying economics and therefore provides information on expected value creation of the acquisition. The results of the research show that goodwill contains elements of value creation: characteristics of valuecreating acquisitions have a positive effect on purchased goodwill. However, also other characteristics determine the amount of purchased goodwill.
Keywords : Goodwill, Mergers and Acquisitions, SFAS 141, SFAS 142, Value Creation
JEL classification : G34, M41, M48
GOODWILL MEASURING VALUE CREATION OF ACQUISITIONS: AN EMPIRICAL RESEARCH 1. INTRODUCTION This working paper is about goodwill as a measure of value creation. In 2001, some important changes have taken place in the US accounting regime [United States Generall y Accepted Accounting Principles (US GAAP) 2001]. 1 Due to the introduction of SFAS 141 “Business Combinations” and of SFAS 142 “ Goodwill and Other Intangible Assets” 2, acquiring companies